Six Steps to Financial Security part 1

Six Steps to Financial Security

If you're like most people, having enough money for a decent and secure life is one of your major concerns. Those on fixed incomes may be especially worried about creeping inflation, the rising costs of goods and services. The threat of unemployment or job loss (or business failure) also causes the jitters.

Perhaps you're a single mother with several children and in great danger of falling under the poverty line. What will you do about improving your financial situation? Or you're deeply in debt. How will you make your payments and become debt-free?

Reasonable prosperity is something all of us would like to achieve and hold on to. But, in many nations, people face nearly insurmountable financial problems. The things that most people in the developed nations take for granted — automobiles, electronic gadgets, savings accounts, adequate clothing and furniture — are out of reach for vast numbers of the human race.

Many developing nations face staggering poverty, near runaway inflation, unpayable national debts, vast unemployment and underemployment. People in such nations must think in terms of basic survival rather than financial prosperity.

To some degree, as they read this booklet, they will have to look over the shoulders of those who live in the well-off nations and who have an opportunity to improve their financial situation.

Let's, then, look at six financial principles that can help a person become more financially secure.

1) Budget Money Wisely

A most important point to remember: Make the most from the money you already earn. To spend one's money more effectively is the same as increasing one's salary. How's your "money management quotient"? One well-known family financial counselor wrote, "Managing your money may well be the single most important thing you can do today."

We may learn to be money earners, but can still end up as paupers. We have to become wise money spenders as well. Studies show that even those individuals who earn large salaries still feel financially strapped. It seems that many people's outgo for needs and wants exceeds their income.

Sound money management teaches us a basic financial maxim: There is never enough money for everything we might want or need. So we need a sensible spending plan.

A spending plan is like a road map. A budget helps us arrive at our financial destination, safe and sound. Every business and government must have a spending plan and must strive to follow it. Such a plan guides the effective use of money in many ways. It helps us:

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Live within our means. A plan gives us greater control over our financial resources. We can immediately know whether something we desire to purchase is affordable.
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Realize personal goals. With a spending budget, we can plan purchases properly, service debt payments, accumulate savings, save for the future.
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Spend money effectively. Merchandisers know that shoppers make spur-of-the-moment purchases. Items on the supermarket counters are often positioned in such a way as to encourage purchases. A spending plan helps us to circumvent impulse buying. We buy only what we planned to buy and only those things our plan tells us we can afford.

A spending plan helps us to ask the right questions about our money. Is this the time to buy this product? Is this the most economical way to buy it? Would we rather have this product than something else? Do we have the money to buy it? Does it fit in with our goals in life?

A spending plan helps us to balance the desire for present enjoyment with long- and short-term financial needs. Instead of buying now and paying later, we begin to think of saving first and then buying when we can afford it.

If you don't know where the money goes, you can't get it to go where it should. A budget or spending plan should include three important areas:

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Emergencies. We should put money away each month for unforeseen circumstances such as car and house repairs.
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High-cost items. Don't buy that new television today. Each month put money into a savings account. Buy the television for cash — on your terms, without interest and at the most financially appropriate time, such as during a timely sale. Don't buy that new television today. Each month put money into a savings account. Buy the television for cash — on your terms, without interest and at the most financially appropriate time, such as during a timely sale.
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Annual or periodic bills. Put away money each week, month or pay period for a future bill such as insurance or taxes. For example, if you pay an insurance bill once each year, put away one twelfth of the total in your savings each month.

2) Increase Income

Another step toward financial security has to do with maximizing our income. We need to have enough money and resources to make life what it should be without jeopardizing our mental, social and spiritual needs.

Most people are paid an hourly wage or work on salary for someone else. If you're in this situation, your chances for suddenly increasing your income by a large amount may not be particularly promising. You may receive automatic but small raises based on a company formula or union-management agreement. In some cases, your company may grant built-in cost-of-living increases.

If there is a possibility of "moving up" financially, you will have to demonstrate your usefulness. Make yourself more valuable to your boss or company. Put the emphasis on helping your organization earn more money, save money or improve its product or performance. Earn a raise.

What if you cannot do better financially even though you work harder and smarter? You have two options. Stay put or move to another job or company. Do not consider quitting your present job, however, until you know a better and more secure position awaits you.

Perhaps your type of employment has only limited monetary value. And you've achieved the highest pay possible. Can you educate yourself and improve your value in the job marketplace?

Perhaps you have the ability to create your own job by starting a small business. To succeed, you will have to make your product or service valuable and desirable to the consumer. Beware, however, of the immense amount of paperwork involved in being self-employed.

Simply put, being able to earn more depends on your attitude of service to others. It also means making the most of your abilities and situation.